Digitalization, the third era of enterprise IT, is beginning, but most CIOs do not feel prepared for this next era, according to a global survey of CIOs by Gartner. The survey showed that many CIOs feel overwhelmed by the prospect of building digital leadership while renovating the core of IT infrastructure and capability for the digital future. The survey found that 51% of CIOs are concerned that the digital torrent is coming faster than they can cope and 42 % don’t feel that they have the talent needed to face this future.

“2014 must be a year of significant change if CIOs are to help their businesses and public sector agencies remain relevant in an increasingly digital world,” said Dave Aron, vice president and Gartner Fellow.

The worldwide survey was conducted in the fourth quarter of 2013 and included 2,339 CIOs, representing more than $300 billion in CIO IT budgets in 77 countries.

During the first era of enterprise IT, the focus was on how IT could help do new and seemingly magical things — automating operations to create massive improvements in speed and scale, and providing business leaders with management information they never had before. The last decade has represented the second era of enterprise IT — an era of industrialization of enterprise IT, making it more reliable, predictable, open and transparent. However, while this second era has been necessary and powerful, tight budgets and little appetite for risk left scant room for innovation.

Entering the third era of enterprise IT technological and societal trends, such as the Nexus of Forces and the Internet of Things, are changing everything; not only improving what businesses do with technology to make themselves faster, cheaper and more scalable, but fundamentally changing businesses with information and technology, changing the basis of competition and in some cases, creating new industries.

“2014 will be a year of dual goals: responding to ongoing needs for efficiency and growth, but also shifting to exploit a fundamentally different digital paradigm. Ignoring either of these is not an option,” said Mr. Aron.

This survey encompassed North America, EMEA, Asia and Latin America. On an average the IT budgets of organization is expected to increase by 8.2% in 2014 and of the actual spends, 41% of money put on IT will not be based within the organization, says the survey.

As much as 41% companies who participated in the survey said that they are not well prepared to meet the demands of torrent of digital opportunities that is coming up. While 22% participants said they were confident they have enough capabilities to handle the challenges and opportunities that the digital revolution is bringing with it.

“IT spending, portfolio balance and the choice of technologies, talent, sourcing options, leadership, structure and governance must all be designed to make the business win. However, despite the need to grow, there is pressure on IT budgets,” said Mr. Aron. The survey showed CIOs expect their IT budgets to remain essentially flat (increasing 0.2 percent on average) in 2014.

CIOs report that a quarter of IT spending will happen outside the IT budget in 2014 — and that is the spending they know about; the reality may be significantly higher. This is a direct result of the new digital opportunities that are more entwined with customer and colleague experiences, and that may, in some cases, reflect concerns that the IT organization is not fast enough or otherwise ready for more digital opportunities.

In order to deliver on this bimodal future, CIOs are planning for significant change in 2014 and beyond:

• A quarter have already made significant investments in public cloud, and the majority expect more than half of their company’s business to be running over public cloud by 2020.

• 70% percent of CIOs plan to change their technology and sourcing relationships over the next two to three years, and many are seeking to partner with small companies and startups.

• 45% companies have implemented agile methodologies for part of their development portfolio, although most need to go further to create separate, multidisciplinary teams, with lightweight governance and new, digital skillsets and alternative sourcing models.